Crane NXT, Co.

Greetings and welcome to the Crane NXT first quarter 2023 earnings call. At this time, all participants are on a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jason Feldman, Vice President of Investor Relations. Thank you. Please go ahead.

Thank you, Operator, and good day, everyone. Welcome to our first quarter 2023 earnings release conference call. I'm Jason Feldman, Vice President of Investor Relations. On our call this morning, we have Aaron Sake, our President and Chief Executive Officer, and Cristina Cristiano, our Senior Vice President and Chief Financial Officer. We'll start off our call with a few prepared remarks, after which we will respond to questions. Just a reminder that the comments we make on this call may include some forward-looking statements. We refer you to the cautionary language at the bottom of our earnings release and also in our annual report on Form 10-K and subsequent filings pertaining to forward-looking statements. Also during the call, we will be using some non-GAAP metrics, which are reconciled to comparable GAAP numbers and tables at the end of our press release and accompanying slide presentation, both of which are available on our website at www.craneNXT.com in the investor relations section. Now let me turn the call over to Aaron.

All right. Thank you, Jason. And good morning to everyone. And thanks for joining our call today. As many of you know, this is our first earnings call for Crane NXT. And I'd like to thank all of our associates for their hard work and dedication as we executed our separation and at the same time delivered a very strong start to the year. Starting on slide five, we reported 97 cents of adjusted EPS for Q1. driven by 3% core sales growth with strong adjusted EBITDA margin of approximately 27%. Additionally, we had significant growth in our backlog, increasing by 34%. Overall, the results were ahead of our expectations. The outperformance was led by crane payment innovations, which delivered stronger than expected core sales growth of 10%. accompanied by more than 400 basis points of margin expansion with adjusted segment margins just over 30%. Consistent with our culture, these results were driven by the disciplined execution of the Crane business system and our dedication to continuous improvement. Crane Currency's results were consistent with our expectations. We remain very confident in our full year performance targets for currency given the strong order rate and backlog growth in the quarter with core orders up 36% and backlog up 132% compared to last year. Our cash flow performance was also strong and in line with the normal seasonality of the business. We remain confident in our plan to achieve approximately 100% adjusted free cash flow conversion this year. Given the strength of our first quarter results, we're raising the midpoint of our full year adjusted EPS guidance by 10 cents to the range of 375 to 405. Well, those are the highlights of the quarter, and Christina will walk you through in more detail our financial performance in a few minutes. Now, as I mentioned earlier, this is our first earnings call, and given this, I'd like to focus on why we have such an exciting investment thesis here at Crane NXT. As shown on page six, NXT is an industry leader providing trusted technology solutions to secure, detect, and authenticate what matters most to our customers. We have two industry-leading businesses, Crane Currency, which provides proprietary technology to secure currency and other high-valued physical products, and Crane Payment Innovations, or CPI for short, which offers detection equipment and systems, aftermarket services, and connectivity solutions focused on detecting and authenticating payment transactions. We finished 2022 with our strongest year in company history with revenue of $1.3 billion, approximately 40% of which comes from reoccurring and recurring revenue, adjusted operating margins of 28%, and adjusted free cash flow conversion of 116%. This is the financial profile you would expect of any premier industrial technology company, and I believe our Q1 results certainly reinforce this position. As we discussed at our March 9th investor day, our core business is resilient with mid single digit growth through multiple economic cycles. Additionally, we have very clearly demonstrated our ability to drive operational improvements through the deployment of the crane business system over many years. This is truly a hallmark of the company and has resulted in best in class financials and very strong free cashflow conversion. And that financial profile is built upon a number of core strengths and capabilities, including our technology leadership demonstrated through launching new and innovative products. For example, during the first quarter, Crane Currency launched its next generation of banknote security technology named Rapid Vision, the world's first multicolor micro-optic security thread for banknotes. This product retains the eye-catching movement proven durability and easy printability of Crane Currency's existing line of products, while also providing a broader range of fully customizable multicolor movement effects, the design possibilities with rapid vision are even larger, counterfeit resilience even stronger, and verification by the public is even easier. We launched this product at our recent conference in March, held at our state-of-the-art banknote printing facility in Malta. This event was attended by more than 100 central bankers and industry partners from 45 nations. That event, along with the features of this product, have already generated a strong pipeline of customers for Rapid Vision, with one central bank already specifying the product in its top denominations. Rapid Vision is a further extension of the product portfolio we have built and commercialized over the last 15 years, starting with motion switch technology that is most well known to many of you for its use on the US $100 bill. And that culture of innovation is just as strong at CPI with differentiated capabilities in the design and manufacturing of detection systems and image recognition software built on advanced algorithms to authenticate products. For example, in the first quarter, CPI deployed the new AlioPro terminal for processing credit card and mobile payment transactions paired with our Simplify cloud management platform for electric vehicle charging applications in Europe. We successfully integrated the solution with EV charging OEMs, and we're launching a program involving a major hotel chain in the UK. These are both examples of the continued focus we have at NXT of extending our technology leadership and developing products that solve our customers' most important challenges. Another hallmark of our company is our disciplined operational execution built on the tools and resources of the Crane business system. It's with this same focus on operational excellence that we developed our formula for shareholder value creation as shown on slide seven. It starts at the top of this image, built on a foundation of a very resilient core business growing at mid-single digits. We continue to deploy CBS to increase margins and improve productivity in the core. This generates our strong free cash flow conversion of approximately 100%. We put this free cash flow to work through our disciplined capital allocation strategy. This includes investment into the core business, paying a competitive dividend, and deploying to M&A, targeting higher growth and resilient end markets. This cycle is continuous, and over time, it will clearly position NXT as a strong compounder, creating significant shareholder value. And as part of this value creation strategy, we've set very clear goals for the business over the next five years. Through a combination of organic growth and M&A, we plan to grow the business to $3 billion in revenue, growing at mid-single digit plus. We'll maintain high 20% operating profit margins, along with free cash flow conversion of approximately 100%. To achieve this plan, we'll focus on three priorities. continuing to invest and grow our core business. Second, focusing on operational excellence through CBS to expand margins and drive our free cash flow conversion. And third, executing our proven playbook on M&A to further expand and diversify the portfolio into near adjacencies. Through the combination of these actions, we plan to move from a mid-single digit to a mid-single digit plus growth portfolio. Additionally, Today the company has low leverage of approximately 1.7 times net debt to EBITDA. We plan to keep our leverage at less than three times as we execute this strategy. In total, these clear measures of success position NXT both now and in the future to be a leading industrial technology company and create significant value for our shareholders. So with that, let me pass the call over to Christina, who will provide additional details on our financial performance in Q1, capital structure, and our updated full year guidance.